Wednesday, November 23, 2016

In case you haven't started to think about your plan for 2017 yet, now's the time. To help you a little bit with your planning, here are three little tools that you might find useful. If you're a long-time reader of this blog, you may have seen them before.

1. Growth Calculator

This little tool allows you to enter your MRR as of the end of 2016 and a target growth factor for 2017. It then calculates your MRR target for the end of 2017 and shows you three different growth paths that lead to that goal. One is based on linear growth, one on exponential growth and the third one shows a trajectory between the linear and the exponential path.

Please note that although this Google Sheet may look a bit like a financial plan, it's not meant to be your plan. :) To create a credible and realistic plan, you need to have a "bottom-up" projection of your growth drivers (e.g. your conversion funnel, distribution channels and sales team quotas). What this little calculator can do is quickly give you a sense for how much MRR you have to add each month in 2017 in order to reach your growth targets, so you can use it to play around with different scenarios and assumptions.

2. Sales Team Hiring Plan

This tool helps you find out how many sales people you need to hire in 2017 based on your growth targets and other import inputs such as your MRR churn rate, your sales team's quota, ramp-up times, etc.

The model is based on an exponential growth path (i.e. #2 from the Growth Calculator above), i.e. it works with a constant m/m growth rate, which you can set in cell D11 and D12 for 2017 and 2018, respectively. You can easily adjust this to a different growth path by changing row 22 accordingly.

One of the things which the model doesn't take into account is employee turnover. In sales teams, employee churn can be significant, both because not every sales person that you hire will work out and because the average tenure of an AE might be only, say, two years. When I tried to add this to the model it became too complex for what I think should stay a pretty simple template. I might give it another go later. In the meantime, I'd recommend that when you build your own hiring plan, assume that if you need x AEs you'll have to hire n*x AEs, and that n is probably something between 1.1 and 2, depending on how good you are at hiring salespeople.

3. Financial Plan

This template helps you create a full financial plan that includes everything from revenue modeling to costs projections and headcount planning. If you look at it for the first time, it might look a little terrifying. I did try to keep it as simple as possible, but if you prefer a simpler version I also have an older, less sophisticated alternative.